Urban Opportunities: Energy Management Software

There are nearly five million commercial and industrial facilities in the U.S. Collectively, they account for nearly half of all domestic energy consumption, costing more than $200 billion annually. However, Chris Pacitti, partner at venture capital firm Austin Ventures, says just five percent of this market has adopted sophisticated energy management tools. Other venture capital firms are beginning to notice the opportunity.

Software-based cleantech like energy management software (EMS) is a quickly growing segment in energy management as some become cautious in hardware-based investments because of companies like Solyndra folding. Leading EMS vendors like C3 and Hara offer tools that allow organizations to measure their energy consumption — often identifying inefficient operations and determining carbon footprints. That can lead to savings in energy consumption as well as real dollars, a fact that’s attracting some business owners’ attention.

A Pike Research report estimates the EMS and services industry will grow to $5.5 billion by 2020, from just under $1 billion in 2011. That’s a compound annual growth rate of more than 20 percent.

Juan Lois, financial analyst at Associated Renewable, says, “The key to the accelerated growth of the industry is the fact that businesses and large corporations now have access to much more detailed and precise energy consumption reports. This allows them to reduce the variability of consumption–especially during peak demand times–reducing energy costs, maximizing efficiency, lowering operating costs, and increasing the value of the property.”

With a recovering economy and several legislative measures related to sustainability going into effect, more and more organizations are taking a look at their energy use for the first time. And public utilities are making this easier for consumers — both residential and consumers, too.

Steve Vassallo, general partner at Foundation Capital, says that “investing in efficiency is five times less expensive than investing in a new energy supply.” He adds, “While utilities historically tilted toward capital-intensive enterprise software sales, the benefits of SaaS-based approaches are simply too good to ignore,” he says. “Utilities will absolutely gravitate toward Cloud-based, managed services.”

Do you have experience in energy management funding? What trends do you see as we move toward a digitally monitored consumption market? Do you think this will be a lasting investment trend — or, do you see a different pattern? Is there more emphasis on hardware-based cleantech than it seems? Leave your thoughts below.